Market Competition in Health Care: The EU’s Parallel Struggle

Last week, I took a break from U.S. health reform and attended a fascinating conference on Health Care and EU Law at Radboud University in the Netherlands.  It gave me the chance to step back and revisit a struggle common to most health care systems — the appropriate role for market competition.  Without drawing too many parallels here, the view from 30,000 feet confirms that like the United States, European health care systems (varied as they are) must decide the extent to which health care is an economic, commercial product versus a non-economic, public good.

In Europe, this tension is generated by the European Union’s internal common market of 27 member states.  European law — enunciated through treaties, directives, regulations, and decisions by the European Court of Justice — prohibits states from restricting the free movement of goods, persons, and services within the EU, and bans anti-competitive or protectionist arrangements.

But is health care a commercial product subject to these market rules?  Or can member states control their health care systems without worrying whether it restricts free movement or is anti-competitive?  Although EU law says that states shall retain responsibility for managing services of general interest like health care and social security, case law has bounded this authority in several high-profile free movement and competition cases.  For example, a series of court opinions has held that member states have limited authority to prevent their residents from traveling to other member states for health care, or even to require prior authorization before reimbursing for that care back in the home state.

The European Court of Justice is drawing some fine lines here.  As Prof. Johan van de Gronden explained at the conference, the more state health care systems embrace principles of market competition rather than social solidarity, the less claim they have that health care is a non-economic activity not subject to the EU’s free movement and competition laws.  Prof. Vasilis Hatzopoulos emphasized that this is the biggest gray area for European health care systems.  This reflects, as Prof. Ulla Neergaard aptly described, the tension between economic and social integration in Europe.

Although EU free movement and competition law has little direct relevance to our current reform efforts, it does highlight the difficulty of deciding what role market competition should play in health care.  For example, the Dutch system has explicitly embraced market competition, and in fact has served as an example for U.S. reform by relying on mandates and competition between insurers.  Germany, according to Prof. Felix Welti, anticipates that recent elections may portend further privatization and economic liberalization in health care (see this useful site, in German, for recent analyses of Germany’s system).

Meanwhile, we are trying to determine if a national marketplace or exchange for health insurance will induce competition among insurers and make insurance more affordable.  As I noted at the conference, the ideal of competition very much remains in U.S. health reform.  President Obama’s speech to Congress mentioned “competition” four times, reaching a crescendo when he said “My guiding principle is, and always has been, that consumers do better when there is choice and competition….  Without competition, the price of insurance goes up and the quality goes down.”

The trick, of course, is creating health care markets that work.  The economics of health care are unconventional, to say the least.  Other Health Reform Watch contributors — namely Professors Jost, Hall, Schneider, and Pasquale — have demonstrated that market incentives are a crude and imperfect tool for reigning in health spending, particularly demand-side incarnations like high-deductible, consumer-driven health plans.  Ultimately, the success of our reform depends on whether we can construct an insurance exchange or gateway that works.

The conference at Radboud highlighted once again how difficult it is to locate and actualize the appropriate role for market competition in health care.